What developers and investors should know about the business value of sustainability

POSTED: 8th July 2015

IN: Guides

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According to Marc Gunther, editor-at-large for Guardian Sustainable Business, sustainability has 'never been more relevant' for businesses.

Indeed, driven by growing pressure from government policy and consumer attitudes, an increasing number of companies are adopting a green agenda in order to reduce their carbon footprint. Sustainability, states Juan Murray, Senior Environmental Planner at NJL Consulting, is "becoming the norm, rather than the exception."

“Sustainability is becoming the norm, rather than the exception."

Juan Murray, Senior Environmental Planner at NJL Consulting

"With building technology continually developing," adds Murray, "Clients are starting to look for a more holistic sustainable approach."

For many businesses, these efforts have started close to home; a focus on the environmental efficiency of their current or prospective commercial property. While some organisations elect to upgrade their existing headquarters with energy efficient lighting or smart power meters, a number of companies relocate to newer properties, designed with sustainability in mind. To meet this demand, there are a growing number of environmentally friendly properties. Currently there are over 425,000 buildings with BREEAM assessment ratings; the standard for best practice in sustainable building design and construction.

There are a number of tangible benefits for an organisation to consider a sustainable home and, as a result, over 70 per cent of investors judge the environmental impact of a property to be a crucial aspect of their investment decision. Understanding the financial and social reasons for this trend is crucial for developers looking to satisfy the growing demand for commercial property.

The cost benefits of a sustainable property

One of the leading benefits of a sustainable property is its cost-efficiency; the use of new technology and innovation to drive down operational bills. Companies that 'manage their environmental and social performance have a superior financial performance'.

"The sustainability performance of a building is an important consideration when selecting new commercial premises due to the potential to reduce operational costs," states NJL Consulting's Juan Murray. "This trend has been particularly relevant over the past few years, due to market demands that necessitated cost reductions while emerging out of the recession."

In 2014, The Co-operative Group unveiled its new 14-storey headquarters in Manchester: One Angel Square. The building, which has the highest score under the sustainable design scheme BREEAM, uses half the energy and 80 per cent less carbon than the company's previous home; the organisation has reduced operational fees by a third. Elsewhere in the business community, the construction of 200 environmentally friendly factories helped high-street chain Marks & Spencer save £50 million in costs and, in London, Camden Council has recently occupied new headquarters in Pancras Square due to the long-term financial implications. Speaking about the council's decision to relocate to a sustainable building, Councillor Theo Blackwell, Cabinet Member for Finance for the council said:

"Through taking these actions and by moving to a building which is much more energy efficient, we will not only be able to achieve long-term financial savings but also be much more environmentally friendly."

Increased consumer demand for 'green companies'

For many companies though, a move to a sustainable headquarters is partly motivated by customer behaviour and demand. A 2014 Nielsen report found that 55 per cent of online consumers were more likely to pay more for services from businesses committed to positive environmental impact. Increasingly then, companies are keen to demonstrate a corporate and social responsibility by acknowledging environmental issues as part of their brand values. Discussing the opening of One Angel Square, Nigel Holden, head of energy and environment at The Co-operative said, "It's about our ethical commitments, it's about our brand."

The Co-operative Group are not the only company to see the public relations' benefit from a focus on sustainability though. Last year, Marks and Spencer became the first retailer to receive certification to all three Carbon Trust Standards.

Staff morale and recruitment

A move to a sustainable commercial property can also have a positive impact on staff morale and recruitment. Research conducted by MonsterTRAK, a division of recruitment site Monster.com, found that 92 per cent of young people would rather work for an environmentally conscious company. “Occupiers want to be located in buildings with features to attract and retain talent," affirms Rebecca Pearce, Research and Data Analyst at CBRE.

Understanding the trend towards sustainability

As environmental concerns become more prevalent, both in the corporate and public arena, an increasing number of businesses are becoming aware of the benefits of a sustainable commercial property. For developers and investors, this demand for sustainable buildings offers a number of opportunities. 'Properties which are not meeting such criteria are losing out,' states Rebecca Pearce.

"The evidence is loud and clear – owners and developers need to improve and adapt their commercial property," she adds.

For more information about commercial property investment and how Aldermore Bank could help with sustainable developments, please don't hesitate to get in touch.

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